Rajya Sabha passes Enforcement of Security Interest and Recovery of Debts Laws Amendment Bill, 2016
The Bill seeks to amend the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Recovery of Debts due to Banks and Financial Institutions Act, 1993, the Indian Stamps Act, 1899 and the Depositories Act, 1996.
Rajya Sabha on 9 August 2016 passed the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016. The bill seeks to amend four laws namely
• Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI)
• Recovery of Debts due to Banks and Financial Institutions Act, 1993 (RDDBFI)
• Indian Stamp Act, 1899
• Depositories Act, 1996
The bill aims to improve ease of doing business and facilitate investment leading to higher economic growth and development.
Earlier, the Bill was passed by Lok Sabha in first week of August. With this passage at both the houses, it will be sent to the President for his assent.
Features of the Bill
Amendments to the SARFAESI Act:
• The bill asks the District Magistrate (DM) to take possession over collateral, against which a loan had been provided, upon a default in repayment, within 30 days.
• It empowers the DM to assist banks in taking over the management of a company, in case the company is unable to repay loans. This will be done in case the banks convert their outstanding debt into equity shares, and consequently hold a stake of 51%percent or more in the company.
• It creates a central database to integrate records of property registered under various registration systems with this central registry. This includes integration of registrations made under Companies Act, 2013, Registration Act, 1908 and Motor Vehicles Act, 1988.
• It says that the secured creditors will not be able to take possession over the collateral unless it is registered with the central registry. Further, these creditors, after registration of security interest, will have priority over others in repayment of dues.
• It empowers the Reserve Bank of India (RBI) to penalise a company of it fails to comply with any directions issued by it.
• It also provides that stamp duty will not be charged on transactions undertaken for transfer of financial assets in favour of asset reconstruction companies. Financial assets include loans and collaterals.
Amendments to the RDDBFI Act:
• The Bill increases the retirement age of Presiding Officers of Debt Recovery Tribunals from 62 years to 65 years.
• It also increases the retirement age of Chairpersons of Appellate Tribunals from 65 years to 67 years.
• It makes Presiding Officers and Chairpersons eligible for reappointment to their positions.
• It allows banks to file cases in tribunals having jurisdiction over the area of bank branch where the debt is pending.
• It states that under certain procedures will be undertaken in electronic form.
• It provides details of procedures that the tribunals will follow in case of debt recovery proceedings.
The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016 was introduced by the Minister of Finance, Arun Jaitley, in Lok Sabha on May 11, 2016.
Earlier in June 2016, the Bill was referred to a Joint Parliamentary Committee of both the Houses, under the Chairmanship of Bhupender Yadav, MP for examination and presenting a Report to the Parliament.
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